Carbon trading: Why 'good' companies embrace 'bad' credits

While European regulators decided to forbid climate-unfriendly CERs, they delayed implanting the ban until May 1, 2013, after industries lobbied for an extension. Also, the UN authority overseeing the issuing of the credits changed its methodology, cutting by two-thirds the number of controversial CERs that could be awarded. That leaves 52 million controversial CERs that will be available before the ban goes into effect.

The US companies claim they were unaware of the dubious nature of the HFC-23 credits before the EU ruled them out. But they have made no public statements to suggest they’re trimming their use now.

“Chevron complied with all required aspects of the EU [European Trading System] regulations at all points in the past and intends to continue to do so in the future”, writes Sean Comey, media adviser at Chevron in San Ramon, Calif., in an e-mail.

“We worked with a reputable financial broker, JP Morgan, to purchase CERs. These purchased CERs had physical delivery from December 2008 through 2012,” says Vanessa Apicerno, media relations specialist at Cabot in Boston, in an e-mail. “We did, however, mandate that all credits purchased be certified and valid.”

ConocoPhillips refused to comment. Dow says it will cease using the CERs when they expire.

“We buy CERs over-the-counter,” says Drea Berghorst, public affairs officer at Dow Benelux based in the Netherlands, in an e-mail. “At the time of the transaction, Dow, and in many cases even the seller, don’t know from which types of ... projects the CERs originate.”

But buyers can easily avoid the problem credits if they want to, carbon-trading experts say. In the case of over-the-counter transactions, buyers can require the seller to disclose the credits’ origin, says Mr. Chatterton of Bloomberg.

“It’s now possible to differentiate between types of credits, many carbon exchanges sell 'green' or non HFC-23 credits,” says Rob Elsworth, policy officer at Sandbag, a London-based research center that calculated the extent of corporations' reliance on the dubious credits.

Not surprisingly, the price of the soon-to-be-outlawed CERs has plunged from a peak of $33 per ton of carbon-dioxide emissions to less than $6 as of February.

“Standard CERs futures contracts [which include HFC-23 credits] still make up over 95 percent of the traded volumes of CERs in the carbon exchanges,” says Sara Ståhl, managing director of global marketing at Green Exchange International, one of the world’s largest carbon exchanges, based in London. “Yet, they are just 46 cents cheaper than our CERplus futures,” which do not include HFC-23 credits.

That means that if all 52 million questionable CERs still available are purchased, the companies in the EU would save less than $24 million. If that’s a benchmark for calculating the value of being “green,” corporations don’t appear to put much stock in it.